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The loan-to-collateral ratio limit will be raised from 85 to 90 per cent in a bid to rejuvenate the stagnant housing market in Finland. (Martti Kainulainen – Lehtikuva)


THE FINNISH FINANCIAL Supervisory Authority (Fiva) has announced its decision to restore the maximum limit on new housing loans from 85 per cent to the statutory level of 90 per cent of the value of collaterals.

The maximum limit for the so-called loan-to-collateral ratio was lowered to 85 per cent only two years ago in a bid to rein in the indebtedness of households in Finland.

The loan cap for first-time housing loan borrowers will remain at 95 per cent.

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“It is important to support the flow of credit to the real economy in the exceptional circumstances brought about by the new coronavirus. Bringing the maximum loan-to-collateral ratio applied to households back to the base level will for its part support the proper functioning of the housing market,” argued Marja Nykänen, the chairperson of the executive board at Fiva.

The coronavirus epidemic has stirred up concerns among consumers about their job security and financial situation, thus hindering real estate transactions and leading to a drop in housing loan applications.

Fiva on Monday said the housing market is showing no signs of over-heating.

It also acknowledged that the debt burden of households remains a central structural vulnerability in the financial system that warrants further attention in the longer term. Relaxing the loan-to-collateral limit, however, is necessary to support economic activity in the acute crisis caused by the pandemic.

Finance Finland on Monday viewed that the decision should benefit consumers planning on buying or swapping houses.

Veli-Matti Mattila, the chief economist at Finance Finland, said raising the loan-to-collateral ratio is one of the measures that are required to promote labour mobility and reinvigorate the economy after the shock delivered by the pandemic. Raising the ratio, he added, should help especially households moving from sparsely populated areas to population centres, given the gap in house prices.

Aleksi Teivainen – HT
Source: Uusi Suomi